Gold rallies further beyond $3,500, fresh all-time peak and counting
- Gold buying interest remains unabated on the back of rising bets for a September Fed rate cut.
- The US tariffs uncertainty, Fed independence worries, and geopolitics benefit the precious metal.
- A modest USD bounce does little to dent the move up ahead of this week’s US macro releases.
Gold prolongs its uptrend for the sixth straight day and touches a fresh all-time peak, levels beyond the $3,500 psychological mark, during the Asian session on Tuesday. The growing acceptance that the Federal Reserve (Fed) will cut interest rates this month turns out to be a key factor that continues to drive flows towards the non-yielding yellow metal. Apart from this, US tariffs uncertainty and escalating geopolitical tensions turn out to be other factors underpinning the safe-haven bullion.
The aforementioned supporting factors, to a larger extent, offset a modest US Dollar (USD) uptick, which tends to undermine demand for the commodity. However, extremely overbought conditions on short-term charts warrant some caution for the XAU/USD bulls before positioning for any further gains. Investors might also opt to move to the sidelines ahead of this week's important US macro releases, scheduled at the start of a new month, including the Nonfarm Payrolls (NFP) report.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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